Posted on 06/01/2008 11:12:38 AM PDT by K-oneTexas
Ten Truths About Oil by Alan Caruba Issue 108 - May 28, 2008
Having written about the energy industry and issues now for a long time, I hope I can be forgiven for being enraged by the comments by Sen. Charles Schumer (D-NY) in response to President Bush’s recent press conference. There is simply no way to describe them other than false.
The Democrat Party has long made “Big Oil” their favorite punching bag, confident that the public has no idea what influences the price and supply of oil. Saying anything favorable to Big Oil is immediately deemed evidence that one is in their pay and whatever facts are offered are therefore invalid.
There are, however, some simple truths about Big Oil that cannot and should not be ignored. To do so leaves everyone at the mercy of energy policies that have created the situation in which the United States finds itself today.
Fact #1. The combined ownership of oil reserves by the independent, investor-owned oil companies such as ExxonMobil, Conoco-Phillips, BP, Chevron and others is barely 4% of the total known oil reserves in the world. By itself, ExxonMobil’s share is 1.08%.
Fact #2. Oil is a global commodity sold on mercantile exchanges for whatever price it can command. Speculation in oil prices is the primary reason they have been driven to utterly insane costs per barrel. It has nothing to do with actual supply and demand.
Fact #3. No nation on Earth is or can be “energy independent.” The geopolitics of oil is complex, but as nations such as China and India have seen their economies grow, their need for oil grows with it and thus they compete with long established industrialized nations for existing oil supplies. This competition has an impact on prices.
Fact #4. The OPEC nations, those in the Middle East and including Venezuela, control 77% of the world’s known oil reserves. Like Russia and Mexico, where the oil industry is controlled by the state, it is generally poorly managed. Several Big Oil companies that were induced to undertake exploration and development in Russia and Venezuela actually had their assets nationalized or stolen at prices well below their investment and value.
Fact #5. Energy is the master resource. All nations with any hope of growing their economies require it, mostly in the form of electricity, but also for oil’s role in transportation. The failure to have a national long-range energy policy that is based in reality can severely impact energy prices.
Fact #6. The United States has, for years, pursued an energy policy based on environmental myths such as “biofuels” in which corn is turned into ethanol to reduce the import of oil, but it costs as much to produce ethanol as to refine oil and it provides less mileage per gallon, thus negating any reason for this additive. Likewise, suggesting that wind or solar energy can generate anything more than its current 1% of the nation’s electricity needs ignores their unreliability and the fact they are heavily subsidized, a form of hidden consumer tax.
Fact #7. It costs billions to explore, discover, extract and transport oil. It takes lots of lead-time as well. The United States Congress has, for decades, refused to permit the extraction of vast oil reserves in ANWR despite the fact it would have little or no impact on the Alaskan wildlife reserve. In addition, Congress has declared 85% percent of the nation’s coastal, offshore areas off-limits to any exploration for oil or natural gas.
Fact #8. The U.S. Environmental Protection Agency, under the mandate of Congress, requires Big Oil to refine oil into some seventeen different formulations in the name of clean air. With three grades of gasoline, that means that refiners must produce some 45 different blends. The quality of air in America is excellent, but the cost of gasoline at the pump continues to rise as the result of these mandates.
Fact #9. America imports two-thirds of the oil it uses. All of its transportation runs on oil. The population continues to grow. Failure to encourage the construction of a single new refinery since the 1970s puts a further strain on the ability of Big Oil to provide the nation’s oil and diesel fuel needs.
Fact #10. Democrats continue to demand that Big Oil’s profits be confiscated in some fashion and some of the inducements offered to explore for more oil be ended. Because the costs of exploration, extraction, refining, and transporting of oil represents billions, the actual profit margin of a company like ExxonMobil is about 10%, well below what industries such as pharmaceuticals and banking enjoy.
For these and many other reasons, Americans are being impoverished at the gas pump because Congress has dithered and failed in one of its most important responsibilities.
Alan Caruba writes a weekly column posted on the Internet site of The National Anxiety Center, www.anxietycenter.com. He blogs at http://factsnotfantasy.blogspot.com.
Perhaps we are at peak oil in terms of classic oilfield production. In terms of recoverable reserves that is available from shale oil we have more damn oil than this country can use in 200 years. Shale oil is economic at the present price of oil. It is actually economic at about 40 dollars a barrel. We could be energy independent in 20 years if the political and enviromental road blocks were removed from industry.
Congress could solve the problem quite easily. Pass a law that would levy a tax on imported oil if its price fell to less than forty dollars a barrel. This would put a price support under domestic shale oil production. Remove the environmental restrictions on the productions of shale oil. It is actually a mining and retorting process.
Congress should remove the restrictions on offshore drilling and drilling on the North Slope. We can get this production on line quickly, about 5 years. This production can help until we have other sources of energy on line.
Congress should pass a law that would streamline the approval process for nuclear reactors for production of electricity. We could generate every watt of electricity we needed from reactors if industry were allowed to do it. These reactors can also be used in the production of shale oil and coal to oil conversion processes that take a great deal of energy. On thing that reactors do best is make heat, a lot of it.
Our nation is blessed with multiple sources of abundant energy. The energy is there to be used. The far left and the environmentalists block our efforts to tap this supply. Their motive is the destruction of our country.
Cost of Coal to liquid fuels is about 30 dollars a barrel. That is about 75 cents a gallon. Add the profit for the oil companies, about 10 to 15 cents, add the tax, 30 to 55 cents dependent on what state you live in. and we are talking paying about 125 to 150 a gallon for diesel. The cost of shale oil will be slightly higher. The hell of it is the government will see this as an opportunity to place a massive tax increase on fuel sales as the costs of fuel went down. They have already done this once in the past.
Peak Oil is a political concept. We are at Peak Oil because we are not permitted access to the huge reserves in ANWR and neighboring areas, under the Arctic Ocean proper, off the East and West coasts and in the Gulf of Mexico. The Canadian Tar Sands will increase production for years to come and Bakken if allowed to proceed will do the same for many years. And then there is Nuclear energy. The squeeze on energy is a political creature, not a natural one.
Its chairman, Daniel Yergin, noted that: "This is the fifth time that the world is said to be running out of oil. Each time....technology and the opening of new frontier areas has banished the specter of decline. There's no reason to think that technology is finished this time."
Trains are good for transporting people from one compact area of population to another. They are probably efficient in some parts of the Northeast. For most of the rest of the country they are not efficient and would always have to be subsidized or people would have to be legally forced to use them, which is also a subsidy. Americans got rich too fast for trains. In Europe where people have historically been clustered and automobile ownership was not widespread due to affluence level the trains grew up naturally. The US would have to be completely redesigned to make trains useful and efficient. All government levels would like to see it because it reduces the mobility of the populace and makes it easier for government to keep tabs on people.
Bakken is not a “smaller field” at 500 billion barrels estimated. Nor are the Tar Sands in Canada. And now Iraq is known to have new oil second to Arabia itself, so far.
Please explain that. Total world production right now is something like 85 million barrels a day. We can, and should, open ANWR and other offshore oil fields, which would increase global production. So we in fact, have not reached peak oil.
The rest of the world may have reached their peak, but ours is not a limitation of sources, it is a politically imposed limit, but that limit can be broken with the right people elected.
Sold and shipped to the buyer in China, Japan or whoever?
“No nation on Earth is or can be “energy independent.” “
I’d like the author to prove that one.
I don't understand this, and the quotes imply to me that there's a complex definition behind this term that means something rather different from what the term implies.
I can maybe accept the "is" (such as "oil-exporter Iran lacks the refineries needed to supply its own needs for gasoline"), but "can be"? The latter implies to me that no country is able to produce more energy than it consumes.
I'm an engineer, not an economist, and would appreciate some elucidation on this point.
US produces (crude oil) 5M bbls/day and consumes (gasoline) 9M bbls/day.
I don't know (I'm an auditor/investigator - not an oil patch expert) but even our proven and yet to be proven reserves might not get us over our daily needs. If it did could we actually produce (extract it from the ground) at a rate equal to our daily needs - to become not dependent on foreign oil? If we did how long would these reserves last? Plus, can the refineries actualy refine our daily needs - even if we do away with all the different grades (like 20 some in CA) and other EPA mandates? How many new refineries would be needed?
From http://www.eia.doe.gov/basics/quickoil.html.
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Actually, we have no factual basis to know how much oil is even in ANWR since the Congress made it illegal to even do the necesary geological work to survey the area with technology created after 1989 so we would even know whether it’s worth pursuing.
When you hear Chuck Schumer or Robert Kennedy Jr talking about ANWR having only a ‘few million barrels’ of oil, they are avoiding the outright lie by using data from the early 1980s before we had decent ground penetrating radar or the ability to drill test wells or even for probes to take samples. When the Lefties talk about how little ANWR would bring us, they avoid confessing that the truth which is they are blocking any efforts to even assess the resource for fear that it will be bigger than the North Shore fields (which put out 1M+ barrels a day even via a pipeline).
Just for the uneducated, please explain how this affects the majority of the world which had yet to be explored for oil and natural gas.
And what is different about Peak Oil now that when it was proposed in 1970.
And why Peak Oil would argue against the US producing more of its own oil to avoid further dependence.
Ping for later...
To be effective, mass transit requires a high population density and a Central Business District with few (if any) outliers. I.e., like Zurich.
Most American cities aren't built that way. Those that are already have mass transit. Plus, some that aren't. Many cities run their busses and light rail for a pitifully few riders -- at great expense to the taxpayer.
See Railrunner, New Mexico...
What is it about bicycles thst makes people look like fireflys and turns them into sphincters.
EXACTLY!
While most of the easy oil has indeed been found, there remains much more to find, but much more expensively recovered. The price point above 60 dollars will cover that expense.
The problem now is that future growth rates for China and India have been overly exaggerated and the resulting oil usage and need has also been exaggerated. China is the worst example with huge buys over the past two years for the singular purpose of strategic storage have been factored as continuous growth. This is about to completely unwind. Their recent growth spurt having more to do with the Olympics then the actual future growth is another factor that will unwind very soon.
Add to this the inflationary impact of this and all commodities, the growth rates of everyone will be impacted and soon.
That's why I am shorting oil.
Something else to consider as well is the fact that the planet is still making it. I think peak oil may be true in relation to total weekly production, but the down turn curve is less steep than some believe, in my humble opinion.
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